Core point of view: the market's understanding of Greentown China mostly stays in the Greentown China in the era of its founder Song Weiping, focusing on the development of high-end housing, which is obviously affected by regulation and control policies. However, we believe that after entering the era of Zhongjiao, the company continues to improve the level of project standardization, and the continuous decline of construction costs and financing costs leads to the rapid improvement of business quality and turnover speed. From 2019 to the first half of this year, the company's sales have been growing rapidly for three years. At present, the company's core profit has hit bottom, and the rapid growth of delivery projects in the next three years will drive the continuous improvement of core profit.
Greentown China, an integrated service provider adhering to the concept of high quality, was founded in 1995. After 27 years of development, it has grown into a leading provider of high-quality real estate development and living services in China.
As the creator of quality real estate, Greentown has a good reputation on the property quality of all kinds of industries. Among real estate developers, under the influence of its founder, Mr. Song Weiping, Greentown China always adheres to productivism and inherits "quality first, giving consideration to others".
The spirit of craftsmen, focus on building "ideal life integrated service provider" the first brand.
Business situation: cost reduction and turnover, rapid growth of sales scale. In 2020, Greentown China investment project sales increased by 214.7 billion, an increase of 58.6% over the same period last year. In the first half of 2021, sales increased by 136.9 billion, an increase of 107.1% over the same period last year. In terms of land, the strength of the company's acquisition of land has increased sharply. In 2020, the construction area of the new project was 2041 million square meters, an increase of 65.1% over the same period last year. The land acquisition cost was well controlled, with an average floor price of 7089 yuan per square meter. The overall land available for sale is rich in resources and sufficient profit space.
Financial analysis: from sales to land acquisition, the future performance release is expected to maintain steady growth in Greentown China's income. In 2020, the company achieved a net profit of 3.8 billion belonging to the parent company, an increase of 53.1% over the same period last year. Profitability improved, with a gross profit margin of 23.7% in 2020 and a net profit margin of 8.8%, the highest in the past five years. ROE rose to 11.8% in 2020, an all-time high. In 2020, after deducting accounts received in advance and contract liabilities, the asset-liability ratio is 71%, the net debt ratio is 64%, and the company's cash-to-short-debt ratio is 2.0, which meets the yellow file requirements under the three red lines, and the financial structure continues to be optimized.
Profit forecast and investment advice
We estimate that from 2021 to 2023, the company will achieve operating income of 83.742 billion, 107.511 billion and 139.939 billion, an increase of 27.3%, 28.4% and 30.2% over the same period last year, and a net profit of 4.37 billion, 5112 million and 6.166 billion attributable to the parent company, representing an increase of 15.1%, 17.0% and 20.6% year-on-year. Diluted earnings per share are 1.24,1.53 and 1.96, corresponding to PE 8.2x, 6.6x and 5.2x.
At present, the Wind Hong Kong Real Estate Management and Development Index trades at a price-to-earnings ratio of 10.03 times earnings, and the current share price corresponds to 8.2 times the 2021 results. Compared with comparable real estate companies with the same sales size, the company has a higher growth rate in the next three years and has a certain advantage in valuation.
We believe that Greentown China in the Zhongjiao era, with its strong real estate development strength and high reputation of real estate projects, has continued to speed up its turnover through an active push sales strategy and an ever-improving standardized product system, driving the rapid growth of sales rebates and forming a benign endogenous growth cycle. At present, with the fierce competition in the real estate industry, Greentown has achieved a higher growth rate than the average growth rate of the industry with its good product quality and increasing turnover speed. For the first time, coverage gives a "buy" rating.
Risk hints: the financing environment tightens more than expected, real estate regulation and control policies tighten more than expected, double centralized transfer rules change, citation data lag or untimely.